I am fond of quoting the opening of A Tale of Two Cities to note that it is always the best and worst of times. But there is one way that I am particularly focused on that modern America is the worst of times. That is the overwhelming influence of the power elite on economic policy. Right now, there is a huge push to tighten the money supply. The net result of this will be to stop even the modest economic recovery we have going. And why do we supposedly need to do this? Because the inflation rate might—Might!—tick up a bit past two percent.
Consider Evan Soltas. In Bloomberg View a couple of days ago, he argued that the economy is nearly at full employment. “The strongest piece of evidence is that far too many people are choosing to leave their jobs in search of better ones—what economists dryly call ‘quits’—for there to be much slack left in the economy and, in particular, in the labor market.” But Dean Baker countered this last night, Getting to Full Employment By Lowering the Goalpost. He noted that although the “quit rate” is up a bit, it is still well below the rate at the bottom of the last recession.
The point here is that the power elites are running around looking for any reason at all to raise interest rates. They’ve never cared about high levels of unemployment. But as long as inflation was running at under two percent, they couldn’t really get away with calling for higher interest rates. Not that many didn’t do just that, but it wasn’t mainstream. Now we have a situation where people are looking at the “quit rate” and screaming inflation, despite the fact that the employment situation looks like this:
This morning, Paul Krugman countered a different attack, Wages of Fear. In this case, the folks who are worried about inflation rising to a reasonable level are arguing that wages are rising and that spells disaster. But as Krugman notes: we are barely seeing any rise in wages and what we are seeing is only quite recent. But more to the point:
Sadly, I have an answer for Krugman. For the people trying to sell the “overheating economy” line, nothing is wrong with rising wages. It is just another plausible sounding argument to justify doing what they want: keeping inflation low. Remember, this is the rentier class. Inflation can’t get too low. The lower the inflation rate, the more their current rents are worth. These people aren’t concerned about the economy generally—only how it affects their particular form of wealth.
Notice that these people can go around and lobby for bad economic policy and no one raises an eyebrow. But the moment the working classes complain about a lack of jobs and income inequality, well, that’s class warfare. It’s maddening. A good economy helps everyone. A bad economy only helps the already rich. This really shouldn’t be a difficult choice. But the fact that even council members of small towns are dependent upon rich benefactors means that their interests take precedence over everything else. And that is class warfare. They’re killing the rest of us.